A Step-by-Step Approach to Transit Oriented …24523/WCTR-Hale-Charles...A Step-by-Step Approach to Transit Oriented Development Project Delivery ... Significant project initiation

The 11th

World Conference on Transport Research

University of California, Berkeley, 24-28 June 2007

A Step-by-Step Approach to

Transit Oriented Development Project Delivery

Chris Hale, postgraduate researcher and

Professor Phil Charles, Director, Centre for Transport Strategy

University of Queensland, Brisbane, Australia

Abstract

A major challenge in successfully implementing transit-oriented development (TOD) is having a

robust process that ensures effective appraisal, initiation and delivery of multi-stakeholder TOD

projects.

A step-by step project development process can assist in the methodic design, evaluation, and

initiation of TOD projects. Successful TOD requires attention to transit, mixed-use development

and public space. Brisbane, Australia provides a case-study where recent planning policies and

infrastructure documents have laid a foundation for TOD, but where barriers lie in precinct

level planning and project implementation. In this context and perhaps in others, the research

effort needs to shift toward identification of appropriate project processes and strategies.

This paper presents the outcomes of research conducted to date. Drawing on the mainstream

approach to project development and financial evaluation for property projects, key steps for

potential use in successful delivery of TOD projects have been identified, including: establish the

framework; location selection; precinct context review; preliminary precinct design; the initial

financial viability study; the decision stage; establishment of project structure; land acquisition;

development application; and project delivery.

The appropriateness of this mainstream development and appraisal process will be tested

through stakeholder research, and the proposed process will then be refined for adoption in TOD

projects. It is suggested that the criteria for successful TOD should be broadened beyond

financial concerns in order to deliver public sector support for project initiation.

Keywords

Transit Oriented Development, TOD, Brisbane, project evaluation, project management

Hale and Charles: A Step-by-Step Approach to TOD Project Delivery 2

A. Introduction

One of the major challenges in successfully implementing transit-oriented development (TOD) is

having a robust process that ensures the effective development and delivery of multi-stakeholder

TOD projects.

TOD projects are currently being developed in Brisbane, Australia as a response to population

growth management and traffic congestion challenges. Brisbane is the capital city of Queensland

on the east coast of Australia – with a population of 2 million people. A current research project

being undertaken at the University of Queensland is seeking to identify institutional structuring

principles for successful TOD.

This paper commences with a short discussion and definition of “successful TOD”. The paper

then outlines the proposed step-by-step TOD project development and viability assessment

process, drawing partly on established approaches from the property industry. For each “step”,

some of the notable theory and important practice is outlined. Breakthroughs and challenges are

put forward, drawing from TOD exercises currently underway in case study location Brisbane.

Apparent problems in TOD practice, lack of progress in project delivery and limited attention to

project-based issues in the research and literature have led to the development of this new

concept for TOD project development and appraisal. In contrast to previous literature, a

reasonably comprehensive method is proposed for consideration – moving beyond planning

considerations and building toward full project evaluations and decisions on financial and other

bases. The steps in the process represent a framework of key considerations, rather than an overly

rigid or sequential set of activities. Significant project initiation activities and deliverables are

outlined in distinct phases, with the economic evaluation process presented as a component

within the broader project development context. The research approach consists of four broad

phases, through which the method will be developed, tested and refined for use:

A. Literature review – of TOD research literature and practice guidance from the mainstream

property industry – which is relatively regulated in Australia and elsewhere, and often quite

restrictive about the methods applied in financial analysis. In this context, mainstream

approaches to project appraisal are probably essential.

B. Formulation of Proposed Step-by-Step Process for project development. The outcome of

this phase of research is presented in this paper. Steps 3 to 5 offer a proposed financial

evaluation/appraisal process, while the overall method should cover the key steps in effective

project development and implementation. Financial appraisal of a TOD project is put forward as

a component within the larger sequence of project activities. There is a need to propose new and

workable approaches in order that industry feedback can be gathered.

C. Stakeholder Research. Key informants in industry and government provide input to refine

and develop the step-by-step process and achieve a relevant and useful framework.

D. Formative Evaluation. The process is applied in new projects – and further review is

undertaken to gauge relevance and workability. Ongoing refinement may occur.


B. What is Successful Transit Oriented Development?

A body of TOD literature has emerged in recent years, much of it from US project examples.

Another tradition of TOD-type approaches to urban development comes from Europe – where

walkable locations with strong transit service and a mix of compact, dense land uses can be found

in many cities. In Australia, some TOD-type examples have emerged almost “by accident”. Re-

vitalisation of historical inner-city areas as locations of choice for residences and offices has

occurred, largely due to transit advantages and the attractiveness of pre-car development patterns.

Increasingly, the low-density outer suburbs, poorly served by transit, are recognized as locations

of economic vulnerability (Dodson & Sipe 2006) and lack of lifestyle and cultural choice.

How do we recognize a successful transit oriented development precinct, given the variety of

influences and approaches that contribute to their formation? Is it possible to find a definition that

can prove effective across different cultural and urban contexts? Hale and Charles (2006)

proposed the following working definition for TOD:

A vibrant, relatively dense and pedestrianised mixed-use development precinct,

featuring quality public space and immediate access to high-frequency public transit.

This definition is perhaps more concise than other available definitions, while containing certain

deeper connotations and implications. It serves to address transport and public realm issues in

TOD as well as the development aspects – and if TOD stakeholders agree on adopting this

definition for application in specific projects, it could prove more instructive and significant than

it may initially seem. Hale and Charles (2006) also proposed that there are three essential success

factors for TOD precincts. These are:

• High frequency, high capacity public transit linking the precinct to the wider

metropolitan area and providing good access. The transit should be integrated

sympathetically with the precinct.

• Mixed-use development with street-front retail. Longer opening hours are an indicator of

success. Offices and workplaces provide a support base of customers. Residential

accommodation provides additional patrons – who hold a stake in the liveability of the

precinct. The development needs to be competitive and viable in the open property market.

• Public space provision that, while generous, is never too large that the space becomes

empty and loses its lively character. Cafes and restaurants should intermingle with public

space. Up-market design is required for public space.


C. A Mainstream Approach to TOD Project Development and Appraisal – 10 Key Steps

The key to making TOD work is to make sure that it is well coordinated across a metropolis.

(Cervero 1998:4)

TOD will naturally be predicated on regional planning policies and transport infrastructure

development. In Brisbane, as an example, state government policy and planning documents such

as the South East Queensland Regional Plan (OUM 2005) and the Infrastructure Plan and

Program (OUM 2006b) have identified regional centres as appropriate locations to accommodate

a substantial portion of expected growth. Under “Urban Form” (OUM 2005:65), some principles

and policies are listed:

Principle: Make the most efficient use of land allocated for urban development.

Policy: Focus higher density and mixed-use development in and around regional activity

centres and public transport nodes and corridors.

A hierarchy of activity centres is categorized, with a Primary Activity Centre (the CBD); a group

of Principal Activity Centres; another set of “Major” centres; and a subsequent grouping of

“specialist”, “principal rural” and “major rural” centres (OUM 2005). These centres are generally

well-placed with regard to existing or planned public transit infrastructure, and moves toward

TOD at these locations are now dependent on efforts in localized master-planning, precinct

design and project implementation. Re-development potential is substantial at many of the

nominated centres. The Regional Plan seeks to promote the regional centres as locations for high

quality TOD (OUM 2005:75):

Principle: Integrate development with transport infrastructure, community services and

employment.

Policy: Facilitate appropriate forms of transit oriented development in proximity to

regional activity centres and high capacity public transport nodes and corridors.

Steps 3 through 5 as outlined in this paper contribute cumulatively to a process of TOD

evaluation – addressing the financial and other concerns that are emerging now that the strategic-

level policies are in place. Financial evaluation of the project is placed within its project context.

While comprehensive planning and evaluation activities for the establishment of a major project

can involve considerable cost, such expenditures represent a small component of overall project

costs. Time, effort and money spent on the early stages of major projects is a worthwhile

investment. TOD evaluation needs to prove financial viability, but also address other areas such

as the public realm and social considerations. While regional policy in Australian cities and

further afield is moving toward the adoption of TOD approaches, the authors contend that

research on appraisal methods and project development strategy has not kept pace with the

strategic demands of urban planning agencies. This paper offers a potentially workable process

toward TOD project appraisal – with its relevance to be tested through stakeholder feedback and

application to new projects in Brisbane.


Step 1. Establish the Institutional Framework

Given the long time frames and substantial investments in planning and design required

for TOD projects, clear and sustained public policy favoring transit-oriented development

is enormously important. (Dittmar & Ohland 2004:66)

Establishment of an institutional framework that supports TOD projects is essential (TCRP

2004:39; Dittmar & Ohland 2004, ch4). The stronger and more flexible the framework, the more

likely that a series of viable TOD projects will be established, rather that one-off “test cases”.

Initially, there is a requirement to identify the diverse range of key stakeholders and their role in

project development (Hale & Charles 2006; Dittmar & Ohland 2004, ch3). It is then important to

establish a forum through which these stakeholders can coordinate and retain a voice in the

development process (Hess & Lombardi 2004:27-29; TCRP 2004:102).

With several parties needing to coordinate planning activities, it is often necessary for

one entity to take the lead. (Hess & Lombardi 2004:28)

It has been suggested that transit agencies are logical project leaders or champions (Hess &

Lombardi 2004:28; Dumbaugh 2004:50; TCRP 2004:40; Hale & Charles 2006)

The strategic visioning process for TOD needs to start at the regional and metropolitan scale and

pursue the development of a network of TOD centres (Hess & Lombardi 2004:71; TCRP

2004:61). Goals, objectives and parameters need clarification (Curtis & James 2004:279).

For metropolitan regions seeking to establish TOD programs, the initial challenge is the

development of a clear and supportive institutional framework for TOD. This includes the

establishment of agreed criteria for TOD project selection. This task should be undertaken among

partners and in light of identified objectives. Importantly, we should not assume that any one

particular institutional arrangement will be applicable in all cases, or that we need to establish a

structure that is final, rigid and not open to adaptation and change.

Brisbane’s Approach

The Queensland State Government’s Office of Urban Management (OUM) South East

Queensland Regional Plan and Program, the “SEQ Regional Plan” (OUM 2005), in conjunction

with the parallel South East Queensland Infrastructure Plan and Program (OUM 2006b) have

laid out a planning and infrastructure framework based on growth boundaries, relatively compact

growth principles, an emphasis on activity centres and a role for TOD.

The transit sector has indicated a level of commitment to TOD through the Translink Draft

Network Plan (Translink 2005), and the Integrated Transport Planning Framework (QT 2003:4).

In addition, Brisbane City Council has released the City Centre Master Plan which repeatedly

identifies the need for TOD as well as exhibiting strong support for urban design principles such

as walkability, transit service and public open space provision (BCC 2006). Local governments

throughout the region are currently preparing Local Growth Management Strategies (LGMS) that

seek to incorporate TOD principles in the vicinity of significant transit stations (OUM 2005:15).


A TOD “task force” has been established by OUM, as recommended in the SEQ Regional Plan

(OUM 2005:123). The taskforce comprises OUM staff, other public sector staff, local

government representatives, academics and development industry participants.

The Way Forward

While the high-end planning framework and principles for TODs have been established, the

challenge is now to ensure that the LGMS represent an appropriate response to the significant

opportunity for new TODs to accommodate population growth. This challenge includes the

application of advanced design and other skills in the preparation of local structure plans or

master plans. While the LGMS represent a compulsory ‘regulated’ approach to moving TOD

planning forward, there is a need for success-oriented commitment toward producing high quality

local TOD plans. Perhaps a lead TOD agent for each major region or locality should be identified,

with the responsibility to develop and deliver TOD projects in their area. It may be that additional

education and awareness programs for the benefit of local government and industry will assist in

building broader understanding and commitment.

Recommendations for Regions Pursuing TOD

Significant commitment has been given to TOD by Government in Queensland – exercised

primarily through planning and transport policy. This may be instructive to other cities and

regions seeking to shift toward more sustainable approaches to development. Equally, we might

suggest that there is something to be learned in the lack of progress on clear allocation of roles

for stakeholders. Additionally, there has been limited progress toward formulating an agreed set

of potential project structures - incorporating public and private activity and input.

The need to establish a clear institutional context for TOD seems to be broadly applicable.

The SEQ Regional Plan 2005


Step 2. Location Selection through Regional Strategy

The Step 2 requirement is to identify potential locations that fit with agreed policies, directions,

and project selection criteria. Once the available locations are identified, TOD teams are in a

position to target the most promising locations for detailed investigation.

TOD theory tells us that to be successful we need to position TOD projects at locations that are

well-served by frequent, high capacity transit - linking the particular TOD precinct effectively

with the metropolitan region and offering connections to key destinations (Swenson & Dock

2004:71; Hendricks et al 2005:7-9; TCRP 2004:463). In the absence of strong existing transit

services, planned or upcoming infrastructure might provide or indicate appropriate locations

(TCRP 2004, s-12, p462).

As TODs are significant land use initiatives, we must be sure that potential TOD locations offer

adequate land for development. As with any development exercise, TOD is seeking to create and

build the intensity of land use beyond what already exists (TCRP 2004:469). Key transit stations

with under-developed precincts in their vicinity should be seen as the primary target areas.

Rather than wait and react, today’s TOD mindset is one of getting out in front and

shepherding land-use changes to achieve a desired built-form outcome. (TCRP 2004:469)

For the metropolitan region looking to pursue TOD, a preliminary short list of preferred precincts

can be drawn from the most advantageous locations available throughout the transit network (and

planned network) or from the hierarchy of activity centres. Locations offering multi-modal

connectivity and greater service frequency, or potential for strong patronage are obvious choices.

Early and very basic assessment of relative planning and development advantages will assist in

the selection of target sites. The eventual list of sites can then be selected according to some

selection criteria, these locations will then receive project development attention.


Transit oriented development principles for SEQ.

Location – Level of infrastructure and services: Focus development around nodes or

corridors where infrastructure capacity exists or can be created. Locations with high

levels of transit service frequency should be given priority. (OUM 2005:77)

Major transit infrastructure projects are currently in planning, including a Northern and an

Eastern Busway (Translink 2005) to complement the highly successful South Eastern Busway –

and these projects should provide a variety of locations. In addition, the existing transit network

seems to offer opportunities, as many of the stations in the rail and busway network are not

surrounded by intensive land use. The Translink Network Plan (2005) refers to 59 “key stations”

– and this set of locations provides an excellent starting point for a review of TOD opportunities.

Office of Urban Management’s Local Growth Management Strategy (LGMS) guidelines (OUM

2006a:15) suggest that local governments:

Identify areas suitable for transit oriented development and whether it is proposed to

prepare a structure plan or master plan for the area or part of the area.


In addition, the OUM have developed “Interim Criteria for Transit Oriented Development

Location Identification”. The aim is to assist local governments in identifying appropriate areas

(OUM 2006c:2). Some of the suggested considerations include: transit (including level of

service); infrastructure context; land availability; market interest; amenity; role of the node or

location within the broader network; potential development impacts; existing or future potential

for connectivity, accessibility and integration; and the ability to deliver mixed land use.

The Way Forward

“Interim” TOD location selection criteria have been developed in Brisbane, so perhaps the logical

next stage is to develop the criteria beyond interim status.

The challenge in Brisbane appears to be represented by one word – timing. In a growth

environment, the major concern at this point would be that inappropriate development occurs in

an ad-hoc fashion or with poor design values at the important locations available throughout the

transit network. Perhaps some attention to the development referral mechanism is required so that

transit agency referral powers are effectively exercised over proposed developments within a

certain radius of key transit stations. This mechanism is already available for local government

planning decisions that incur state government policy implications (England 2004, ch1). Lack of

attention to timeliness in TOD might also create problems in achieving value capture.

An alternative approach to the identification of TOD precincts and projects might be to invite

proposals from experienced industry participants – either for nominated locations or according to

the preferred locations of proponents.


The principle of actively reviewing and selecting TOD locations on the basis of regional strategic

considerations seems to be functioning effectively in Brisbane at this stage – and this step would

seem to be relevant, necessary and broadly applicable wherever TOD is pursued.


Step 3. Precinct Context Review

Once the metropolitan region has identified its target locations, initial TOD project development

at the precinct level requires a review of contextual and planning issues as well as a detailed

investigation of transit service and infrastructure with the intention of accumulating

background information on which later project activities can be based.

Generalised information gathering activities at this stage might include; a review of existing uses

in the area, a look at demographics and employment characteristics, as well as the identification

of other upcoming developments in the area. An important aim in project appraisal activity is to

deliver an early estimate of the floor space and number of residences that might be developed.

Swenson & Dock (2004:78) review their case studies in terms of both the planning and transit

context, with an eye on existing parameters as well as the prospects for improvement and growth.

In planning, the basics of supportive area plans, zoning for sufficient densities, walkable precinct

design, and workable parking requirements are important (Dittmar & Ohland 2004, ch4 & p70;

Hendricks 2005:9; Hess & Lombardi 2004:28).

For contextual assessment processes, the Australian Property Institute (API) Feasibility Study

Guidance Note establishes the need to review the planning parameters of development projects.

Firstly, it suggests a review of the site itself and the planning context (API 2005:273), including:

a look into “Planning and Other Statutory Requirements”; “Planning Permission” – incorporating

as-of-right entitlements and a review of risks involved in seeking development approval above

that allowance; “Planning Policies” as they influence the supply of similar buildings; and finally

“Particular Issues” which might include anything from heritage or environmental controls to

existing planning permissions and conditions, building and other impacting regulations, or

perhaps the infrastructure context.

For the transit context, we need to investigate the level of existing and planned infrastructure and

service as well as wider connectivity (Hendricks 2005:7). This might involve building an

understanding of the frequency of service, operating hours, current and projected capacity,

connectivity and travel times to other locations in the network (such as the CBD). Inter-modal

connections (bus to rail for example) are of particular interest. The station environment is also

extremely important, with locations that already have high quality stations, or those expecting to

see renovation or replacement also providing strong opportunities.

Both planning and transport context need to be reviewed with a view toward lifting outcomes and

making improvements in these areas. Project developers need to assume that major TOD

activities involve a significant level of change and development beyond current conditions.


Transit oriented development proposals under consideration in 2005 include redevelopment

focused around Milton, Bowen Hills, Cleveland, Albion, Park Road and Buranda railway

stations; Woolloongabba busway station; and Southbank busway and railway stations. (OUM

2005:75)


In terms of analysis of sites, once again the OUM (2006c) “TOD selection criteria” provide a

clear qualitative overview of the particular issues that require attention and consideration. No

contextual, planning or transport review has been presented to the public on any potential TOD

location as yet.

The Way Forward

Firstly, the list of precincts outlined above is not comprehensive with regard to the extent of

opportunity available in Brisbane. New sites of potential, in association with the upcoming

busway projects are not officially recognized at this point, neither are all of the nominated

activity centres or major transport nodes under current consideration. Secondly, progress on

identified sites has in the most part been slow. There have been few official announcements or

releases on these key locations subsequent to the early 2005 release of the Regional Plan

document. Perhaps to some degree this represents concern over the potential for unhelpful land

speculation activities. Alternatively, it may be that efforts in contextual review and early project

development at many significant precincts are simply inadequately resourced or have not yet

been established. Initial precinct planning and project development will require a variety of staff

with the full armoury of skills and qualifications (including land economics, engineering, design,

finance, transport and planning). Preparatory TOD activities will require leadership and

accountability, and a concerted drive to achieve progress in project planning and initiation.


The application of a “Step 3” process seems to be necessary in Brisbane and this should be

instructive to regions pursuing TOD. Precinct planning and context review needs to be delivered

in a timely manner for project development and assessment purposes – and Brisbane’s lack of

clear progress may also be instructive.


Step 4. Preliminary Precinct Design

The creation of precinct design sketches will assist in both the visioning process and the

identification of development potential.

“…make an accurate assessment of physical development which can be accommodated

on the site, having regard to site characteristics and the likelihood of obtaining

permission. This assessment may be undertaken in consultation with appointed project

consultants, such as architects and quantity surveyors…” (API 2006:274).

Design considerations for TOD precincts are central to project success (TCRP 2004:104, 169),

with quality design said to bring a range of benefits (Bell 2005:93,96). Dittmar and Ohland

(2004:30-32) suggest the creation of lively, walkable, dense, mixed-use, precincts. Gehl (2006)

and Hale & Charles (2006) have discussed the role of public open space. Holt-Damant (2005) has

suggested that the transit station itself plays a fundamental role in the success or otherwise of a

TOD precinct.

Developers are fond of using sketch plans to understand the possibilities of larger development

parcels. This represents the preliminary urban design exercise. The purpose of this activity,

during an evaluation or project development phase, is to better understand development potential

- to firmly identify potential configurations of streets, open space and building footprints – and to

provide effective estimates of residential and commercial floor space parameters.


New publicly-released precinct designs for significant locations directly connected to transit

stations are few and far between in Brisbane at this stage. As an example, the Woolloongabba

area has seen the presentation of a “structure plan” which is based on future potential rather than

firm proposals.

The Way Forward

The “precinct design” stage represents the next phase for serious TOD activity in Brisbane, given

that the metropolitan planning context has been established and given that precincts with

significant TOD potential are readily identifiable. Alternatives in precinct design development

include; design charettes, competitions or design proposals from potential developers or a design

panel. These approaches would be possible once the preparatory activities delivered through

stages 1 to 3 were completed.


Lack of progress on this basic element of the project development and appraisal process is

instructive. The publication of clear designs and the formulation of firm proposals is essential in

delivering progress toward TOD implementation.


Step 5. Initial Viability Study

Having gathered all the necessary information on planning and transit and an outline of the

project design parameters, the initial project viability study can be delivered. This consists of

both a financial viability study (business case) and a review of public interest.

The mainstream property development appraisal approach in Australia is outlined in the API

Professional Practice manual “Feasibility Studies” (API 2006 – Guidance Note 5). This

approach (perhaps more accurately referred to as “viability” study) gives a strong indication of

the activities required to deliver certainty in the financial evaluation of TOD projects. API list the

stages in a feasibility study as: a) obtaining instructions on development scope; b) preparation

and collection of information; c) evaluation of development potential; d) estimating development

costs; e) assessing value on completion; and e) determining profit margin and rate of return. (API

2006:272)

Rigorous application of the recommended steps 3 and 4 outlined in this paper will contribute to a

similar process of information gathering – leading on to comprehensive TOD financial

evaluation, decision making and project establishment. The importance of further development in

TOD project evaluation frameworks has been identified in the TCRP (2005:473). Analysis of

expected TOD project cash flows requires careful attention (Dittmar & Ohland 2004:93). It is

also essential to provide an assessment of project social and community impacts. The TCRP

(2004, ch7) puts forward a discussion of items that might be of interest in any review of public

benefit for a proposed TOD project. Benefits are said to include: increased transit ridership (a

significant environmental benefit); joint development opportunities; urban renewal; economic

development; and improved land values.

The financial appraiser will need to find comparable developments for relevant information on

potential revenues. Engineers (or quantity surveyors) will be consulted for independent advice on

project costs and project timelines. If the cost of land is a known factor, a complete set of project

financial variables is at hand and expected returns can be calculated. If the land purchase

parameter (“residual land value”) remains under investigation, hurdle rates of return can be

applied. TOD Development Corporations, Urban Renewal Corporations, or TOD teams working

for transit agencies may wish to apply their own hurdle rates of return. The mainstream hurdle

rates seem to be a workable, but not inflexible guide for TOD projects, and these are generally

around 20%+ Internal Rate of Return (IRR). Although the financial appraisal approach is firmly

established in private industry, government agencies are often not familiar with the practice and

may not have a capability readily at hand.

The public interest study will need to incorporate an appraisal of the community, social and

environmental impacts and benefits of any proposed TOD project.


As yet, the key parameters, agreed aims and hurdle rates of return for TOD financial viability

studies have not been fully developed in Brisbane. Neither are comprehensive social,

environmental and economic assessment methods in place.


The Way Forward

Financial viability studies are an important step that needs to be taken in order to pave the way

for any TOD activity. The private sector approaches are workable and highly developed and seem

to provide direction – but transport and other issues also need to be incorporated into a broader

project evaluation process. Public benefit would clearly be well-served by the positives identified

in the TCRP and elsewhere, but negative or perceived negative impacts should also be accounted

for.


Project appraisal needs to clearly establish that the wider public benefits, as well as the financial

positives, outweigh the costs (both quantifiable and qualitative). To ensure this outcome,

comprehensive evaluation methods and frameworks need to be developed. Delivery of this step is

relevant and important to all cities pursuing TOD.

“Potential Unlimited” – but coordinated and success-oriented processes perhaps missing

Woollongabba Busway Station August 2006. Photo: C Hale


Step 6. Decision Stage

The validation phase: During this phase, major program characteristics are validated

and program risks and costs are assessed, resolved, or minimized. An affirmative decision

concerning further work is sought when the success and cost realism become sufficient to

warrant progression to the next phase. (Cleland & Ireland 2002:48)

TOD developments will require that full due diligence is complete before formal project

initiation. Project intitation will most likely be a political decision. If the preliminary evaluation

is complete, and the development meets hurdle criteria, the benefits of initiating the project

should become clear.

The Project Management Body of Knowledge (PMBOK 1996) refers to the “demonstration and

validation” stage and to the “initiating processes”. This process is said to require: a clear

description of the project; a strategic plan; and reference to project selection criteria. The tools for

the decision process include“benefit measurement” (usually economic modeling) and expert

judgment (PMBOK 1996:50).

Hendricks refers to the importance of developing “performance indicators” in the broader context

of TOD evaluation (Hendricks et al 2005:37), while the TCRP (2004:473) have identified this as

an area that requires more detailed research and investigation.


While there is limited experience to date in decision-making specifically for new TOD projects,

broader frameworks for public sector decision making are in place. These processes will probably

be the starting point for TOD decisions. The Public Private Partnerships Guidance Material

(PPPGM 2003) states that decision making for major projects involving cooperation between the

public and private sector should ‘safeguard the public interest’ by paying attention to: affected

individuals and communities; public access; social equity; consumer rights; security; privacy;

accountability and transparency; and cost effectiveness.

The Way Forward

Decisions should rely on quantitative analysis of project parameters and estimated financial

performance, as well as a qualitative review. Decision makers could base their verdict on policy,

planning, social, environmental and commercial considerations – with public investments in

TOD needing to be cost effective and broadly beneficial.


We recommend that interested parties consider the development of a comprehensive analysis,

evaluation and decision-support framework. The method outlined in this paper may provide a

starting point after further testing and refinement.


Step 7. Establish the Project Structure

To pursue the project, there is a need to establish the development entity under which real

estate will be held and developed. TODs, including those with strong public sector involvement,

will need to create an ownership vehicle through which project equity, risk and reward can be

aportioned. In addition, the preferred project steering mechanisms for TOD activity need to be

clarified. TODs need a working entity through which development management activities are

carried out.

According to Curtis & James (2004:282, 294) project structural models for integrated land use

and transport projects will need to offer function, organization and accountability. They put

forward the West Australian Landcorp model as a project structure that has functioned

effectively in TOD. The TCRP suggest that a range of institutional structures are possible (TCRP

2004:51,52). Hale and Charles (2006) have suggested so-called Special Purpose Vehicles (SPVs)

for equity-based project arrangements, in line with the Australian development industry’s

widespread adoption of this approach (Robertson 2004). They have also proposed a publicly-

owned TOD Development Corporation as the preferred project steering framework, as has

Newman (2005:6), while Curtis & James (2004:283) use the terminology ‘strategic body’.

The TCRP (2004:78) points out that equity-based agreements are workable and common in US

TOD examples, and Dittmar & Ohland (2004:92) suggest that transit agencies support their

implementation.

Over three quarters of surveyed transit properties with joint development projects have

equity partnerships… (TCRP 2004:78)

Additional project structural considerations revolve around resourcing and staffing - with

adequate skills and the right people required (Dittmar & Ohland 2004:85)


There has been limited progress to date in the establishment of TOD project structures.

While positive and successful outcomes may be achievable on some sites under the

existing processes and regime, it is the Property Council’s view that many sites will

require alternative governance models. That is, mechanisms outside existing

arrangements. (PCA 2005:49)

The Property Council of Australia (PCA) has put forward some firm proposals for TOD project

structure. Perhaps counter-intuitively, they suggest a strong and over-riding role for the public

sector in TOD project steering, establishment and financial structuring.

The Property Council proposes that a Transit Oriented Development Corporation must

be established and specifically empowered to assemble land, upgrade infrastructure

and approve developments in order to achieve a series of sub-regional teams to

oversee TOD ‘icon projects’. (PCA 2005:49)


The Way Forward

The preferred model at this stage in SEQ and many other locations seems to be for the private

development industry to drive projects from the outset, though as yet there have been few, if any,

public representations from the local industry to suggest that they greet this concept with

enthusiasm. The Property Council’s recommendation for a TOD Corporation perhaps deserves

further consideration.

The challenge lies in adopting and developing a project steering and ownership model that can

balance public and private input, and link financial commitment with control and

responsibility. The equity partnership approach, through SPVs, is widely recognized as an

effective model. Project managerial considerations need to be similarly balanced. Where a

particular party provides only a low-level of financial commitment, their role in TOD projects

might be more advisory in nature.


We recommend that regions undertaking TOD, establish a project structure that is suitable to

project context, and that they adopt “establishment of project structure” as a formal step in their

project development process. This probably involves choosing from a range of available

approaches. Many regions seeking to further a TOD program seem to face similar challenges in

applying workable project structural models.

Woolloongabba Structure Plan – Courtesy BVN architects


Step 8. Acquire Land

Once an experienced development team is in place and the project is conceptualized, the

next step in the real estate development process is gaining control of the site.

(Dittmar & Ohland 2004:86)

The development entity has been established, land value calculated and a decision made to go

ahead, subject to cost-effective acquisition of land. The project champion must now close the

negotiations for land purchase.

Dumbaugh (2004:50) discusses the importance of land assembly in establishing TOD projects.

The TCRP (2004:72) initially seem to suggest that it is not important who carries out the

purchase and assembly – as long as it is carried out. Later in their analysis they acknowledge that

this seems to be a task, which is perhaps best carried out by the public sector (TCRP

2004:111,112).


No formal process or legislative enablement has been established for the purposes of statutory

land acquisition related to TOD projects. This implies reliance on commercial negotiations for

assembly – or might it be interpreted as a significant unresolved hurdle.

The Way Forward

The land acquisition and assembly process represents a significant TOD step – and formal

process and frameworks must be in place to guide public sector organizations through this

challenging process. This may involve legislative enablement, or it might imply a stronger focus

on standard negotiation-based approaches toward land-holders.

Strong negotiators can usually find a mechanism whereby land owners share in any value uplift.

This might involve an upfront cash purchase to the value of the land, plus an offer of further

payment conditional on development approval within favourable parameters. Developers

generally use conditional contracts of purchase, subject to final due diligence investigations and

successful development approval. TOD projects would seem to have similar requirements to

mainstream projects in this phase, although public sector rules and policies might hamper

progress.


We recommend that regions with an interest in TOD develop a guidance framework for land

assembly and acquisition. Stakeholder feedback obtained during further testing and refinement of

the step-by-step process should provide greater clarity on the parameters of a workable

acquisition processes.


Step 9. Development Application

A development application should be prepared and lodged as soon as practically possible. This

involves further detailed design work and more planning input. The private sector developer

would ordinarily weigh the pros and cons of making an application for as-of-right development

approval, or alternatively seeking development allowances above this level.

Dittmar & Ohland (2004:85) identify this process as a significant project risk factor:

Entitlement risk is the risk is the risk associated with securing the approvals, zoning and

permits critical for the project to be built and occupied.

The TCRP suggest that unnecessary delay and risk can be avoided at this stage if metropolitan

planning has provided appropriate localized zoning (TCRP 2004, ch4 & p63)

Planning policy for TODs will preferably have been established such that increased density is

part of the “as of right” development allowances within proximity of key stations. Planning

consultants will provide advice on this issue, prepare the application and liaise with local

government during the review process.


The current intention in Brisbane seems to be to cultivate local area planning and zoning in order

to allow development approvals with the level of density that TODs need in order to be effective

in land use and transport terms. This target should be in sight on completion of the LGMS

process (OUM 2005).

The Way Forward

In the absence of effective TOD local area planning (designated for full completion some time

after 2007 in the Brisbane example), uncertainty remains and timing concerns abound. It is not

clear how TOD might be advanced where new transit projects are in motion (requiring almost

immediate precinct design and project development activity) but where local planning schemes

are not yet in place.


For all cities involved in furthering TOD-style development, planning schemes need to be

formulated that support appropriate development applications. In any TOD project development

process, the development application is a vital step – and in appraisals, the planning application

risks need to be reviewed. All planning-based activity on a TOD project should be targeted

toward the submission of a strong planning application. Supportive localised planning needs to be

delivered prior to or in co-incidence with initiation of transit infrastructure projects


Step 10. Project Delivery

As with most real-estate development, TOD occurs largely through the private

marketplace. (TCRP 2004:76)

Once the preliminary activities are concluded, the project team can finalise design, build the

project and manage it once completed.

Cleland and Ireland (2002, ch11, p378) discuss the various phases of projects – including the

“execution” stage. They also discuss the importance of planning for effective project delivery and

the need for project control systems to deliver complex projects. The project control systems

consists of: establishing standards, observing performance, comparing actual performance and

taking corrective action.

The Project Management Body of Knowledge (PMBOK 1996) outlines some important “project

knowledge areas” that should be addressed in the TOD delivery phase. These include: project

integration management, scope, time management, costs, quality, human resources,

communications, risk and procurement. Dittmar and Ohland (2004:85) also identify staffing and

skills issues in TOD:

A successful development team will have the range of skills needed to mitigate four risks

associated with a real estate development project: entitlement risk, construction risk,

financial risk and market risk.

Clearly, market exposure and performance is a major concern in TOD projects (TCRP 2004:76,

84, 86; Dittmar and Ohland 2004:86). As risk and reward are inter-related, it is suggested that

some level of market exposure be maintained by the public sector in order to allow value capture.

(TCRP 2004:174-176; Dittmar and Ohland 2004:6, 26)

Attention should be paid to project timing – so that the market is met at the most opportune

moment. In the private sector, speed of completion is a strong motivating factor due to the impact

on project financial returns. Project cost is a perennial concern, but revenue maximization also

needs attention. Successful project management and delivery is often said to rely on adequate

project resourcing and the application of appropriate development management skills. TOD

Corporations might undertake a strategy that involves subdivision of the site and sale of key

parcels to developers at a rate that more than covers the costs of design, planning and land

amalgamation. This approach would reduce market exposure risks, while maintaining an opening

for value capture, and fully funding strategic intervention for regional TOD objectives.


The Regional Plan’s established approach to TOD projects is heavily oriented toward the private

industry taking on all project risk and return considerations. This implies at least a nominal

understanding of the importance of market dynamics in TOD projects, but perhaps overlooks

public sector access to revenue and value capture opportunities. Additionally, a more realistic

assessment of developer strengths and weaknesses in TOD may be needed, given their limited

experience in TOD implementation.


The Way Forward

So far, the importance of timeliness in project activities, so crucial in the project delivery phase,

has not necessarily been in evidence during the process of moving from TOD policy foundations

into project activities.

Project resourcing for TODs is also an area that will present challenges in any environment

where project professional staff and on-site workers are in reasonably short supply. Clear

attention needs to be given to the establishment of project teams that are efficient, flexible and

capable of long-term cohesion and retention of project knowledge.

The goal of value capture needs to be an overarching objective, as returns and recovery of

expenses are only available toward the end of a project life span – after careful but at times risky

development activities.


All cities and regions interested in the creation of TOD precincts need appropriate frameworks

and processes for project implementation. Steps 1 through 9 represent a broadly applicable series

of items that need to be check-listed if the project delivery stage is to be initiated on a firm

footing, while steps 3 to 5 allow a meaningful project appraisal to be formulated. All TOD

activities prior to project implementation (step 10) need to take the demands of the construction

and marketing phase into account.

Queen Street Mall, Brisbane April 2006. Photo: C Hale


D. The Research Process from Here

This paper has outlined what the researchers feel is a workable approach to TOD project

development and financial appraisal. Attending to the phases outlined here should result in a clear

evaluation of project fundamentals and prospects for profitability – within a wider set of steps

toward project delivery. In formulating this approach, the literature on TOD has been consulted,

as well as that on mainstream project development and property financial analysis. The main

function of this paper is to propose the process in the context of peer reviewed publication.

The next phase of the research will involve researching and establishing stakeholder feedback as

to the workability of the process. This will involve surveys and interviews with key informants in

industry and government. During this phase, it is expected that opportunities for further

refinement and development of the process will arise.

A final stage in the rigorous establishment of a viable project development process for TOD will

be to apply this process in the project development phase of a real-life project and to elicit further

stakeholder and informant feedback on the performance of the model. The approach has already

drawn on direct project experience in the establishment of TOD projects, and on preliminary

input from a related series of stakeholder research interviews (still underway) - but its

applicability to a wider market of TOD projects will be well-served by further exposure through

peer reviewed formats.

E. Conclusions and Recommendations

In this paper, we have proposed that high quality transit, mixed-use development and public

space underpin the success of TOD projects and represent key project objectives. The South East

Queensland region has seen the introduction of new planning policies and infrastructure

development proposals – and these lay a foundation for greater levels of integration in land use

and transport, as well as supporting TOD at ‘activity centres’. These principles and policy

approaches seem to be broadly applicable.

Ten steps have been proposed as a route toward the successful establishment and delivery of

TOD projects. Within these 10 steps, a self-contained module of project appraisal tasks is put

forward. It is recommended that project appraisal activities are not considered separately from the

larger task of developing a livable and functional transit precinct.

A final recommendation is that TOD stakeholders should avoid ad-hoc TOD-related activity and

instead focus on methodical completion of the steps outlined here – or a similar series of pre-

agreed milestones. Mainstream project management theory and practice point to the need for a

staged process through which key deliverables and project steps can be completed in a timely

manner. This process should move relatively rapidly and smoothly beyond initial strategy and

planning-based project activities, into a round of project financial appraisal-based milestones,

then through to decision making and organization of project structure – and finally into the

project delivery phase itself.


E. The 10-Step Checklist

Step Title Outcomes/Deliverables Scheduled

Completion

Date of

Completion

1 Establish the

Framework

Establish clear policy framework to

support TOD on a regional basis.

2 Location

selection

Use selection criteria to establish a listing

of potential TOD locations or precincts.

Select preferred location.

3 Context review Review planning context, transit

infrastructure and service at selected

location.

4 Preliminary

precinct design

a) Undertake design exercises to establish

a vision for the precinct.

b) Define the development parameters:

Street network; building footprints; public

open space; floor space

(office/retail/civic/res).

5 Initial viability

study

a) Preliminary evaluation of business case

(NPV/IRR/Revenue/Cost/Profit).

b) Identify and evaluate social, economic

and environmental impacts.

6 Decision stage Clear decision to either initiate or shelve

the project – based on evaluation and

review carried out previously.

7 Establish the

project structure

Establish relevant and effective project

structure - linking decision making and

project steering with financial

responsibilities. Balance and clarify scope

of public and private input. Establish

equity partnership via Special Purpose

Vehicle (SPV).

8 Acquire land Undertake land acquisition in a timely and

cost effective manner. Pool land assets

into project SPV.

9 Development

application

Apply for development permit/entitlement

and secure delivery.

10 Project delivery a) Deliver completed project through

appropriate resourcing and management

methods.

b) Manage project revenues, costs, timing

and risks effectively to achieve

profitability and a livable, functional

precinct.


G. Acknowledgements

This paper is based on the first stage of a three year research project supported by an Australian

Research Council funding under the Linkage Project research program, including a postgraduate

scholarship, together with funding provided by Queensland Transport and Queensland Rail.

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